How Do I Pay Off My Student Loan Debt Fast?

How Do I Pay Off My Student Loan Debt Fast?

Written by Corrina Murdoch
Fact-checked by Caitlin Wood
Last Updated November 4, 2021

While there are many ways to get a well-paying job, the vast majority require some form of higher education — and education costs money. The cost of living continues to rise, and many opt for post-secondary education to improve their chances of economic success. There are available measures to reduce your expenses, such as using savings and applying for scholarships and grants. However, many Canadians still require student loans to afford tuition. Student loans are accessible, and often the only way some individuals can access higher education. 

Since the average individual with a degree makes roughly 1.7 times more than those without one, it truly is an investment in your future. Of course, that increased salary doesn’t show up overnight. In the meantime, you must address your student loans, lest you damage your credit. The good news is that you can pay them down surprisingly quickly if you are diligent and savvy. 

How To Pay Off Your Student Loans Quickly?

The longer you sit on your student loans, the more interest you accrue. Though it’s usually at a reasonable rate, it does add up. Plus, paying them off efficiently does nothing but good for your credit profile and can accelerate your big-picture financial future. 

Start Paying Right Away

It might seem overwhelming, but paying your loans sooner is always better. If you can, begin paying your loan debt while you’re still in school or immediately after. There are multiple sources of student financing, and some enable you to pay more frequently than others. When selecting a loan source, be sure to consider the payment opportunities after you conclude your studies. If you are already approaching repayment, be sure to familiarize yourself with the different methods available. 

Government Student Loans

With government loans, you would typically get a grace period of six months without payments, though interest would accrue. However, due to the COVID-19 crisis, the government announced a no-interest student loan model until 2023. You can take advantage of this by making as many payments as possible during this time. All of your payments will go to the principal amount. You’d be surprised how quickly that adds up. 

Private Student Loans 

If you opted for student loans through a private lender, interest will accrue during your education, as well as during grace periods. These lenders capitalize interest when the repayment period starts. Unlike a grace period where the loan doesn’t accrue interest, the value of the interest during that period gets added to the principal. The amount of interest you weren’t paying during your schooling simply morphs into the loan itself, so you end up paying it one way or another. Once the interest is capitalized, balancing the lender’s books, it compounds from there. Aim to make a lump-sum payment prior to the end of your grace period, requesting that it goes straight to interest. It will diminish the amount you need to pay off. 

Consolidate Your Student Loans

There will be interest rates and payment schedules to juggle for those who sourced loans from multiple private lenders. Instead of dealing with the stress, consider consolidating your loans. It might sound drastic, but the process is simple. All of your eligible student loan debt is combined into one loan. Consolidating your loans streamlines the payment process, since bundling your accounts results in a one regular payment instead of several. The ultimate result is less interest and a much easier time handling your debt. 

Provided you keep your payment amount the same as it was prior to consolidation, more of your payment will go to the principal. This can speed up the process of paying off the debt. Be sure to read the consolidation agreement carefully, though. There could be fees associated with extra payments, so make sure you plan ahead. 

Budget And Cut Spending

Regardless of the source of your debt and income, you need a budget. It lends a clear picture of where your money goes and can highlight ways to save. Even small tweaks like buying off-brand cereal or streamlining your subscription services can give you a few extra dollars. When it comes to paying off loans, every penny counts. If you’re struggling with budgeting, there are apps that round up every purchase to the nearest dollar and stash the extra in a savings account. You can use this extra money to pay off your loans more efficiently. 

Switch From Monthly To Biweekly Payments

It might seem small, but if you shift your payments from once a month to once every two weeks, the result is an extra payment every year. The change will likely go unnoticed, especially if your income is structured on a biweekly schedule. Without impacting your financial flow, this small step can dramatically increase the speed at which you pay. 

Make Extra Payments 

The good news about student loans, whether through the government or through a private lender, is that they enable penalty-free extra payments. You can tack on an extra payment, however small, whenever you are able. This way, if you get a raise or earn an extra commission, you can supplement your regular payment schedule. 

Keep in mind that the terms and conditions of private loans are different from federal or provincial arrangements. The profit-based structure of private lenders typically bars you from making extra payments without penalty. Check the terms of your specific contract or call the company holding the debt to find out if extra payments are in the cards. 

What If I Can’t Afford My Student Loan Payments? 

As the last couple of years have showcased, the economy can be unpredictable. To account for this, the federal and provincial governments offer loan repayment assistance. Based on your financial situation and other household factors, you can access quite a bit of help. 

Government Student Loans

For those unable to pay back either federal or provincial student loans, there is a Repayment Assistance Program. To qualify for the RAP, you complete a form detailing your financial limitations. This can be done either online or via snail mail. The RAP form inquires as to how many dependents are in your household, how you are making money, and how much you make. If you are without income, it asks how you are sustaining yourself. 

Your details are entered into a calculator that determines your minimum debt payment. Most often, it results in reduced payments for a six-month period. In some cases, you can defer payments for six months with the government footing the bill for interest during that period. You’re left with the same principal amount, but the six months’ breathing room gives you a chance to repair your finances.

Private Student Loans

Private lenders are usually less accommodating than government-funded models. Due to the profit requirements of alternative lenders, there is less wiggle room to offer loan forgiveness or deferral. In these situations, it is better to reach out to a third party for assistance. Look for non-profit credit counsellors in your area. Many offer socially distanced, online services where you can confidentially discuss your financial situation. These professionals will give you advice on how to best manage your debt. 

Be sure to research the credit counsellor and ensure that they are both certified and reputable. It’s the fiduciary responsibility of the counsellor to provide good advice, but that’s only a guarantee if there is actual oversight. So long as you find a reliable agency, you can get access to services like loan consolidation to reduce financial strain.  

Student Loan Debt FAQs

How do government student loans work? 

Upon graduation, graduates get an interest-free period of six months where no payments are required. After this time, monthly payments are expected and taken via automatic withdrawal. Typical amortization periods are over ten years, though you can make extra payments to reduce this time substantially. 

Do government student loans come with a fixed or variable rate?

You can choose between fixed and variable interest rates. If you choose a fixed rate, your interest will be Canada’s prime rate, plus an extra two percent. Those choosing variable rates are subject to fluctuations, though the rate remains in tandem with the prime rate. Variable rates typically result in less interest, though they come with a higher risk. 

Who qualifies for student loan forgiveness?

Loan forgiveness is a hot topic these days, with the concept of federal student debt forgiveness being used as a campaign issue. This refers to loans on a national level, not necessarily by province. Each jurisdiction has its own methods for loan forgiveness, so the opportunities will vary based on where your loan is held. 

Final Thoughts 

Student loan debt is completely normal and a well-accepted part of society. When used properly, the loans can leverage you into a career with a decent income. Provided you plan ahead and prudently address your loans at every opportunity possible, you can save a lot in interest. By making regular payments and taking advantage of benefits like the interest freeze until 2023, you can pay off your student loans faster than you might expect. 


Rating of 5/5 based on 3 votes.

Corrina Murdoch has been a dedicated freelance writer and editor for several years. With an academic background in the sciences and a penchant for mathematics, she seeks to provide readers with accurate, reliable information on important topics. Working as a print journalist for several years, Corrina expanded her reach into the digital sphere to help more people gain insight into the realm of finances. When she's not writing, you can find Corrina swimming and spending time with family.

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